Andy Greenberg ran a great article in Forbes yesterday discussing the new product put out by American Science & Engineering Inc. (ASEI).
It’s a new system that takes the full-body scanner used in airports to X-ray passengers and puts it in a van.
The van can see into cars, houses, and just about anything else that’s not coated in lead.
And let me tell you… the system is incredible.
The scan can detect hidden cargo like people, bombs, plastic weapons, or radio active devices like dirty bombs.
The company has already sold more than 500 of these vans — despite the obvious concerns over privacy and illegal search and seizure here in the United States, which the Forbes article focuses on.
But to tell you the truth, it’s not the purpose of Wealth Daily to pontificate on the morality of possible investments… Quite frankly, I don’t care.
The only thing I care about is whether or not this company can return us a profit.
25% gains in 24 hours
For example just yesterday, I recommended put options on Cal-Maine, the country’s largest producer of eggs. It just so happens that Cal-Maine wasn’t involved in the massive egg recall and did nothing wrong.
My readers banked 25% profits in a day on a company tarnished by the broad brush of the market. That’s how the game is played.
Privacy fears aside, it’s not in the United States that ASEI will make the most of its money… It’s everywhere else.
If there’s one thing I know, its that terrorism isn’t going away. Just last night, a string of car-bombs across Iraq killed more than 45 people in seven cities. The worst of the bombing struck a police station southwest of Baghdad and killed 16 people. I’m pretty sure the families of these people wish they had the scan van.
If you can detect these bombs by looking through cars, security operatives will have an advantage and a chance to stop them. And anti-terrorism is just one market…
American Science & Engineering has a whole range for systems for the military, cargo inspections at ports, baggage at airports, mail parcels, and specific events — say, the Super Bowl or a Presidential Address.
As you can tell by this ten-year chart, ASEI goes up on two factors: It launched after 9/11 because it was deemed an anti-terrorist stock, and it went up again in 2004 as the promise of full-body scanners in airports met the reality of increasing sales and more markets due to the ramp-up of wars in Iraq and Afghanistan.
You’ll notice that this chart is a giant pennant formation. The stock is very close to the uptrend line and only need to break out above $80 to give it another leg up.
This mobile scanning van could provide that impetus.
The shares took a hit after the company reported less than stellar revenue on August 9th.
According to SEC documents:
The Company reported revenues of $53,643,000 as compared with revenues of $54,692,000 for the first quarter of fiscal year 2010, net income of $6,801,000 as compared with net income of $7,336,000 for the first quarter of fiscal year 2010, and earnings per share of $0.74 as compared with earnings per share of $0.81 for the first quarter of fiscal year 2010. These results represent a 2% decrease in revenues, 7% decrease in net income, and a $0.07 decrease in earnings per share when compared to results for the first quarter of the prior fiscal year.
That’s not the kind of results that Wall Street likes to hear. But the subsequent sell-off might provide a long-term buying opportunity, based on a strong balance sheet and a surging backlog.
The company reported: “[a] 33% increase in bookings to $76,706,000 for the first quarter of fiscal year 2011 as compared with $57,705,000 in bookings for the first quarter of the prior fiscal year. Backlog at June 30, 2010 increased 38% to $218,792,000 as compared with $158,363,000 at June 30, 2009.“
CEO Anthony Fabiano pointed to the record bookings of the Z Backscatter systems and new orders from the ZBV Military Trailer and Z BackscatterVan. Many of these were repeat customers.
The company also will pay a cash dividend of $0.30 per share on September 2, 2010.
You are too late to get in on this quarter’s payout, as you had to own shares on August 23, 2010. This was a raise of $0.10 a share over last year.
Not only does it look as if ASEI has the market beating product in a market that should continue to grow; it also has a very conservative balance sheet.
The company has a reported cash position of $160.95 million and debt of only $8.05 million. Its market cap is $627.04 million.
The forward p/e is 15.97. Its competition — Analogic Corp. (ALOG) and OSI Systems (OSIS) — have p/e ratios of 63 and 26 respectively, though they did have some marginal revenue growth this quarter.
American Science and Engineering Inc. (NASDAQ: ASEI) looks like a solid long-term buy if it drops below $65.
I’d try to pick it up when the share price hits the 200-day moving average.
All the Best,